2018 (12) TMI 564 - AT - Income Tax

Capital gain computation - FMV determination - Evasion of stamp duty upon transfer deeds - determination of market value for acquisition - methods of valuation to be adopted in ascertaining the market value of the land on the date of the notification under section 4(1) Held that - In arriving at a reasonably correct market value, it maybe necessary to take even two or all of those methods into account inasmuch as the exact valuation is not always possible as no two lands may be the same either in respect of the situation or the extent or the potentiality nor is it possible in all cases to have reliable material from which that valuation can be accurately determined. See Special Land Acquisition Officer v. T. Adinarayan Setty 1958 (11) TMI 33 - SUPREME COURT Likewise Hon ble Jurisdictional High Court in the case of CIT Vs. J.Chelladurai (2011 (12) TMI 41 - MADRAS HIGH COURT) observed that no useful purpose would be served to remand the matter and further observed it would be reasonable to fix market value of the land by averaging value given by the assessee and the assessing officer as on 01.04.1981. Under these observations from Hon ble High Courts including from Hon ble Apex Court, we deem it appropriate to adopt the value as suggested from both sides - it will meet the ends of justice, if the fair market value of the property is adopted at ₹ 3,50,000/- as against ₹ 5,00,000/-, per ground, as on 01.04.1981,suggested by the ld.Counsel for the assessee and ₹ 50,000/-,per ground, adopted by the ld.CIT(A). Thus, the appeal of the assessee is partly allowed.

Summary

Issues Involved:

1. Whether the guideline value maintained by Registration Authorities can be the basis for determining the market value for acquisition purposes.
2. Validity of the valuation method adopted by the Assessing Officer and the Commissioner of Income-tax (Appeals).
3. Consideration of expert opinions and comparable sale instances in determining the market value of the property as on 01.04.1981.

Issue-wise Detailed Analysis:

1. Guideline Value as Basis for Market Value Determination:

The assessee contended that the guideline value maintained by Registration Authorities for checking stamp duty evasion cannot be the basis for determining the market value for acquisition. This argument was supported by various judicial precedents, including decisions from the Hon'ble Bombay High Court and the Hon'ble Rajasthan High Court, which held that guideline values are limited to stamp duty purposes and do not reflect the true market value for acquisition. The Tribunal considered these precedents and agreed that guideline values alone are not a reliable basis for determining market value under acquisition proceedings.

2. Validity of Valuation Method Adopted by Assessing Officer and CIT(A):

The Assessing Officer had relied on the Sub-Registrar's opinion, which valued the property at ?50,000 per ground as on 01.04.1981, while the assessee claimed a value of ?5,00,000 per ground. The CIT(A) upheld the Assessing Officer's valuation. The Tribunal noted that the valuation should consider multiple factors, including expert opinions and comparable sale instances, rather than relying solely on guideline values or the Sub-Registrar's opinion.

3. Expert Opinions and Comparable Sale Instances:

The Tribunal referred to the Supreme Court's guidelines in the case of Special Land Acquisition Officer v. T. Adinarayan Setty, which outlined methods for determining market value, including expert opinions, comparable sale instances, and potential profits. The Tribunal also considered the Hon'ble Jurisdictional High Court's decision in CIT Vs. J.Chelladurai, which suggested averaging the values provided by the assessee and the assessing officer when there is a significant discrepancy.

In light of these principles, the Tribunal deemed it appropriate to adopt a balanced approach by averaging the values suggested by both parties. Consequently, the Tribunal determined the fair market value of the property as on 01.04.1981 to be ?3,50,000 per ground, which was a compromise between the assessee's claim of ?5,00,000 and the Assessing Officer's valuation of ?50,000.

Conclusion:

The appeal was partly allowed, with the Tribunal directing the Assessing Officer to adopt the fair market value of ?3,50,000 per ground as on 01.04.1981. The Tribunal emphasized the importance of considering multiple factors and expert opinions in determining the market value for acquisition purposes, rather than relying solely on guideline values.